Wireless Internet Service Provider (Due Diligence)

A Case Study Showing the Importance of Due Diligence Services During Acquisition

A client asked us to perform a due diligence audit and estimate the fair market value of a Wireless Internet Service Provider located in Illinois. Several other suitors were also looking at the company, and we had to work quickly so that our client could decide whether or not this was a good opportunity and, if so, establish a fair purchase price.

What We Did

We prepared a list of more than 50 specific questions for investigation that covered all aspects of the acquisition that would be relevant to this decision, including market opportunity, competitive landscape, barriers to entry, technology, sales and marketing, operations and processes, management team, financial performance, and subscriber base. Then, we met with the management team at their headquarters, assessed their operations, reviewed and analyzed company financial and operating documents, and posed our own questions.

Our meetings and supplemental research enabled us to complete a first-pass assessment of the opportunities, risks, and market potential presented by the acquisition opportunity whereby we were able to deliver a complete report to our client in less than two weeks. The report included our recommendations, supported by analysis of financial documents, estimates of valuation based on several alternative measures of value, a SWOT analysis (of strengths, weaknesses, opportunities, and threats), and an assessment of risks. We presented several growth scenarios, ranging from extremely conservative to moderately optimistic, and quantified the performance of the company using a discounted cash flow analysis. Then we compared the company with a basket of peer companies based on price-to-revenue multiples, price per subscriber, and other measures. We also presented the client with a large binder of current articles on the market, competition, products and services, licensing and frequency issues, and other areas of concern.

The Results of our Due Diligence Audit

The client entered negotiations armed with a thorough understanding of the company’s strengths, weaknesses and potential for growth, and an independent assessment of the value of the deal. Ultimately the client decided not to make an offer, based on the significant risks we uncovered, coupled with the high price-tag set by the seller.

"There is always a better strategy than the one you have; you just haven’t thought of it yet."

- Brian Pitman, former CEO of Lloyds TSB

"Tactics without strategy is the noise before defeat."

- Sun Tzu

"What’s the use of running if you are not on the right road?"

- German proverb

"Planning is an unnatural process; it is much more fun to do something. The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression."

- Sir John Harvey-Jones

"Change is inevitable, growth is intentional"

- Glenda Cloud

"Chaos in the world brings uneasiness, but it also allows the opportunity for creativity and growth."

- Tom Barrett

"The innovation point is the pivotal moment when talented and motivated people seek the opportunity to act on their ideas and dreams."

- W. Arthur Porter

A fool with a plan is better than a genius without a plan."

- T. Boone Pickens (from his father)

"Success is doing a thousand little things the right way … over and over again."

- Charles R. Walgreen Sr.

"The general consensus of the board was we've got nothing to lose by doing a feasibility study. That'll give us data, not just feelings and what-ifs."

- Robert Haskell

"There can be no talk of when until a feasibility study is completed."

- Viktor Khristenko

“You can observe a lot just by watching.”

- Yogi Berra

"Slow and steady wins the race."

- Unknown

"Observe the turtle: He progresses only with his neck out."

- American Indian saying

"Complicare e facile. Semplificare e difficile."

- Bruno Munari

"I have missed more than 9,000 shots in my career. I have lost almost 300 games. On 26 occasions I have been entrusted to take the game winning shot ... and missed. And I have failed over and over and over again in my life. And that is why I succeed."

- Michael Jordan (in a TV commercial for Nike)

"Measure what is measurable, and make measurable what is not so."

- Galileo

"You've got to be careful if you don't know where you're going 'cause you might not get there."

- Yogi Berra

"Every great dream begins with a dreamer. Always remember, you have within you the strength, the patience, and the passion to reach for the stars to change the world."

- Harriet Tubman

"Work like you don't need the money. Love like you've never been hurt. Dance like nobody's watching."

Satchel Paige

When the river rises, the fish eats the ant. When the river falls, the ant eats the fish.